Merchant Cash Advances (MCAs) are one of the highest risk ventures that a small business can take on. Most notably, MCAs offer small business owners funding for pretty much any need. MCAs can be funded in as fast as a few hours and with minimal paperwork, documents, and underwriting. However, once taking one of more MCAs for their business, many small business owners find it difficult to adhere to the usurious or outlandish terms. What happens next? Some MCA lenders do not think twice before filing suit. So, using data from the New York State Court System Database (NYSCEF), we learned who the most litigious MCA companies are and have established a list of the TOP 10 Most Litigious MCA companies.
By Thomas Tramaglini, Chief Operations Officer
Merchant Cash Advances...
When small businesses need funding, because its easier to get struck by lighting than it is to get a reasonable small business loan small business owners turn to alternative sources for funding: The Merchant Cash Advance.
A Merchant Cash Advance is not a loan. A company, let's call them a Merchant Cash Advance company will offer to buy future sales of a company at a certain price. Once that money is advanced to a small business, the small business agrees to return an agreed to valued price of the receivables on a daily or weekly (or similar) basis.
To arrive at the amount for the advance, MCA companies gauge how much to advance a small business owner in several ways, including previous credit card sales and revenue going into their business bank account. Variables such as industry, number of deposits, daily balances among others are used by the lender to hedge risk. And, a Merchant Cash Advance (MCA) is one of the easiest funding options for small business owners because MCAs are unsecured, do not require strong credit, usually do not require collateral, and also require little documentation (if any). The average MCA file can be funded within a day and usually requires several months of business bank statements.
Our Study
Each week, hundreds of lawsuits are filed in New York, Florida, Texas, and basically any place which favors MCA companies. Beacon Client Solutions is a business consultancy and one of our specialties is helping small business owners who are being sued by predatory MCA lenders.
Our research team at Beacon accesses all court records daily and keeps a record of such public data. In this list, we pulled data from the New York State Electronic Court System to build our analysis. The list compiled comes from the past 12 months and has a sample size of over 7,000 records.
So... who are the most litigious MCA companies?
1. Prosperum Capital Partners dba Arsenal Funding
2. Fenix Capital Funding LLC
3. CFG Merchant Solutions
4. Silverline Services Inc
5. Mantis Funding LLC / Kalamata Capital Group
6. DMKA dba The Smarter Merchant
7. Fundfi Merchant Funding
8. Advance Servicing Inc
9. QS Capital Partners (Quicksilver)
10. Advance Service Group / Specialty Capital LLC
***Please note that this list does not control for the total clients a MCA company has and considering one company may have more clients and a lower rate, the list is a list of the volume of lawsuits filed.
Implications
If you have a Merchant Cash Advance from one of the MCA companies above, this is a warning - if you have any issues, you will likely be sued. Some of the MCA companies will file suit within a few days of you not making a payment or stopping payments.
You will need to address the lawsuit or receive a judgement for your business and personally. And the ramifications of having a judgement afterwards is quite serious.
Contact Beacon Client Solutions to better understand your situation and how we can help you.
Dr. Thomas Tramaglini is the Director of Operations and Negotiation for Beacon Client Solutions, a company that supports small businesses on a host of fronts, especially MCA debt. Thomas has been a small business owner for many years, as well as held leadership positions in several organizations and companies. Thomas holds a B.A. in History, as well as Masters and Doctorates in Organizational Leadership from Rutgers University, The State University of New Jersey.
Disclaimer: Beacon Client Solutions is not an accountancy, or a law firm. We are business consultants. While Beacon works with outstanding attorneys and accountants, we cannot and do not provide legal or tax advice. All of our work is connected to those who are legally certified to give such advise. Beacon does have a longstanding body of work in MCA resolution and understands what small business owners deal with, specific to MCA. Beacon Client Solutions serves clients in all 50 states, Puerto Rico, Mexico and Canada.
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